DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange fell more than 2% early Friday in reaction to reports suggesting the Caspian Pipeline Consortium network partially resumed operations at the Black Sea terminal after a successful inspection of a single port mooring (SPM-1) revealed limited damage to the loading infrastructure, easing concern that a prolonged disruption of Kazakhstan oil exports would exacerbate a shortfall of available supplies on the global oil market.

Oil loadings at the Novorossiysk export terminal on the Black Sea resumed sooner-than-expected, according to Kazakhstan's energy minister Bulat Aqchulaqov, who indicated that one of the three moorings at the site sustained little damage from an alleged storm.

Earlier this week, Russian officials argued that it could take up to six weeks to fix damaged infrastructure at the port that processes up to 90% of Kazakhstan oil exports. The CPC pipeline has a 1.4 million bpd capacity that carries crude oil from oilfields in central Asia to export terminals on the Black Sea. A prolonged disruption of the CPC pipeline could have forced Kazakhstan to shutter producing wells because of limited storage capacity that could have inflicted long-lasting damage to the country's production capacity. Organization of the Petroleum Exporting Countries pegged Kazakhstan oil production close to 2 million bpd at the start of the year after antigovernment protests briefly shuttered operations at the country's major oil fields of Tengiz and Kashagan.

European leaders this week decided against sanctions on Russian oil and gas exports as part of a response to Moscow's aggression in Ukraine -- a decision that could have removed up to 3 million bbl in daily crude exports from Russia. Speculation had been building for weeks that a potential ban on Russian oil could in fact be implemented after some European leaders voiced support for the embargo. Countries that are less dependent on Russian oil, such as Sweden, Ireland, and the Czech Republic, view an oil ban as an option while some of the bloc's largest importers, like Germany and Netherlands, remain opposed to the idea. For perspective, Germany imported 490,000 bpd of crude oil and condensate from Russia last year, accounting for 21% of Russian imports into OECD Europe and second only to the Netherlands at 640,000 bpd.

Germany, the bloc's largest economy, already suffers from an economic slowdown triggered by surging natural gas and diesel prices that weigh heavily on its manufacturing sector.

"Business confidence has taken a hit, with the war in Ukraine and its impact on prices, supply chains and demand expected to have repercussions for growth over the remainder of the year," said Phil Smith, Economics Associate Director at S&P Global.

Economic growth in the European Union slowed markedly in March as the economic impact from the Russian invasion of Ukraine offset a boost to demand from the further reopening of the economy from COVID-19 restrictions. The headline S&P Global Eurozone Composite PMI fell from 55.5 in February to 54.5 in March, according to preliminary estimates. The decline indicates some loss of economic growth momentum from February's five month high, but still signals the second-strongest monthly expansion since November.

The United States and European Union inked a deal on Thursday that would deliver an additional 15 billion cubic meters of liquified natural gas to the bloc, part of efforts to ease the region's reliance on Russian energy supplies.

Near 7:30 a.m. ET, NYMEX May West Texas Intermediate futures fell more than $2 bbl to $110.22 bbl, and ICE May Brent futures declined to $117 bbl, also down $2 on the session so far. NYMEX April RBOB futures fell 2.72 cents to $3.3625 gallon, and April ULSD futures dropped back 4.38 cents to $4.1096 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com